Life insurance can be a heavy subject since it involves planning for someone’s finances after they pass away. However, it often serves as a critical piece of a financial plan. It can help the insured protect their loved ones financially and pass on more of their wealth tax-free. Sometimes, the hardest part can be opening up a discussion with your loved ones on the topic.
This article will dive into some tips for starting the life insurance conversation with your loved ones to help make things easier. Then, we’ll look at a few life insurance policy types to consider — including term life insurance, permanent life insurance, and final expense insurance.
Ways to start the life insurance conversation
Here are a few ways you can broach the subject of life insurance more comfortably:
1. Ask questions
Start by asking thoughtful questions that connect with your loved ones.
For instance, if you’re discussing life insurance with a parent, you may approach the topic by bringing up how you love them and want them to be taken care of — including financially. Then introduce the topic of life insurance and how it helps them plan for final expenses and debts.
2. Discuss your goals
Given the implications of life insurance, it’s vital to keep things as light as possible — and that often means starting the conversation with current financial goals before bringing up you or a loved one’s eventual passing.
For example, say you’re talking with your spouse about life insurance. You might discuss saving for your child’s college or retiring comfortably before bringing up how life insurance fits into the picture. You could even mention how some policies, like permanent life insurance, can help you reach these goals through the cash value growth component.
3. Bring up current events
Current events may be on your loved ones’ minds, so they can serve as an excellent vessel for opening the life insurance conversation. This is especially true after 2020 and today’s uncertain economic times, as many realize the importance of life insurance for protecting themselves and their families.
These events can help you provide logical evidence of the need for life insurance while emotionally connecting to your loved ones.
Types of life insurance policies to consider
Once you’ve successfully opened the life insurance discussion and illustrated its importance, here are a few policy types to consider:
1. Term life insurance
Term life insurance covers you for a fixed period, generally 10 to 30 years. Your beneficiaries receive your full death benefit if you pass away while the policy is active. If you outlive your term life policy, you will have to get a new policy to continue coverage.
However, policy premiums can be inexpensive, making term life insurance a budget-friendly option.
2. Permanent life insurance
Permanent life insurance costs more than term life insurance, but you’re covered for life as long as you keep up on premium payments. A portion of each premium goes into a cash value growth component. This component grows tax-deferred at a certain rate that varies by permanent life insurance policy type.
You can withdraw from your cash value or borrow against it with excellent loan terms when it grows large enough. If you ever surrender the policy, you can receive the total cash value minus surrender charges.
3. Final expense insurance
Final expense insurance is a small permanent life insurance policy designed to cover end-of-life expenses, such as medical bills and burial costs.
Keep in mind that the death benefit is smaller than a traditional permanent life insurance policy, but premiums are typically lower. You get lifetime coverage and a cash value growth component for wealth-building as well.
The bottom line
Thinking about end-of-life topics isn’t pleasant, which can make life insurance a tough subject to bring up. But it’s a vital discussion since life insurance is an important portion of financial planning for many.
Start by asking relevant, thoughtful questions and centering the conversation around financial goals. Then, use current events to back up the importance of life insurance.
Once the topic is comfortably out in the open, compare the pros and cons of term life, permanent life, and final expense life insurance. Make sure to shop for multiple quotes once you’ve settled on a policy — this will help you get the best coverage for your budget.
Sagar Sridhar is an accomplished personal finance blogger hailing from Canada. With a unique blend of quirkiness and enthusiasm, he has established himself as a prominent figure in the personal finance industry. Sagar’s passion for finance, coupled with his engaging writing style, sets him apart from his peers. While he has a background in computer engineering and a Master’s in Project Management, Sagar’s true passion lies in helping others manage their money. His writing has been featured in several top Canadian finance publications, solidifying his status as a sought-after voice in the field. Despite juggling his work and blogging schedule, Sagar remains resolute in his mission to make a lasting impact on the personal finance world.